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PKR vs dollar: Rupee likely to maintain upward trend against greenback

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1 year ago

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  • Currency increases by 1.43% or Rs4.31 against dollar.
  • Demand for dollars in parallel or unofficial market drops.
  • Tens of millions of dollars return into interbank, open markets.

KARACHI: As markets enjoy a surge in export earnings and remittance inflows after the government cracked down on speculative activity, the rupee is set to continue its upward trend against the US dollar, The News reported Sunday.

The rupee closed at 301.16/dollar on Monday, but gained strength and finished at 296.85 on Friday. 

In the five sessions this week, the currency increased against the dollar by 1.43% or Rs4.31 as the demand for dollars in the parallel or unofficial market dropped.

According to Tresmark, a financial technology company, in a note on Saturday: “Liquidity has improved in the forex market as exporters were selling in ready as well as in forwards with good volumes and also due to uptick in daily remittances, and due to this rupee will continue to strengthen gradually.” 

The current account deficit, which measures the gap between foreign exchange inflows and outflows, narrowed by 79% month-on-month to $160 million in August, as a result of improvement across all four heads: trade, services, primary and secondary income.

The regulatory measures aimed at curbing illegal activities in the foreign exchange market have begun to yield results. This has helped in narrowing the gap between the interbank and open market exchange rates. Therefore, the remittances have started improving.

Since the start of the raids on black market operators on September 6, traders claim that tens of millions of dollars have come back into Pakistan’s interbank and open markets.

The rupee, which hit a record low on September 5, surged more than 10% from levels seen before the crackdown, recovering to trade for less than $300/dollar last week.

However, the rupee also faced some pressure from the lifting of import restrictions, which increased the demand for foreign currency. In August, it lost value against the dollar by almost 6%.

“In last 30 years, rupee has depreciated by 7% a year on an average against US dollar,” Topline Securities, a brokerage firm, said in a report. 

“But the last 6 years were really bad in which rupee has fallen on an average by 15% a year,” it added.

Tresmark said the SBP’s decision to maintain the policy rate at 22% on Thursday can be interpreted as the nature of current economic ills is not demand-driven. There are supply-side issues, fiscal mismanagement and speculative trends. 

Increasing rates would not impact demand (which is already low) and would not have unlocked supply as more hoarders, speculative buyers and people with black money are immune to higher rates as they usually keep in current accounts or in cash.

“Whereas the government expenses go up meteorically (being the largest borrower) and in a vicious cycle impact inflation,” it said. “Interest rates are at their highest in Pakistan’s history anyway, so taking administrative measures was really the more practical way out.”

However, it also warned that the reversal in commodity prices is still slower than desired and that the border with Afghanistan is still porous and activities continue. 

“So expect higher volumes of imports (which are required to smoothen supply) to keep a check on rupee parity. As a result, rates may not come down below 285/$ (July end levels) and should consolidate at the 290-295 levels,” it said.

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Business

Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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